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1975 Supreme(MP) 25
High Court Of Madhya Pradesh
A. P. Sen and R. K. Tankha, JJ.
UNION OF INDIA - Appellant
Versus
TARACHAND - Respondents
First Appeal 9 Of 1971
Decided On : 03/03/1975
B.C.VERMA, P.S.KHIRVADKAR
The property in future goods passes to the buyer only when they are produced or manufactured, and without any further act of appropriation.
Headnote:
SALE OF GOODS ACT - SECTION 6(3) - AGREEMENT TO SELL - PROPERTY PASSING - CONVERSION - DAMAGES - MEASURE OF DAMAGES - BREACH OF CONTRACT - REMEDIES.
Fact of the Case:
Plaintiff entered into a contract with the Railway administration for the purchase of coal-ash accumulated at a pump-house for a period of one year. The contract was subject to certain restrictive covenants, including the right of the Railway administration to use the coal-ash for its own requirements or to issue it to Government and Semi-Government works. The Railway administration later cancelled the contract and sold the coal-ash to other contractors. The plaintiff filed a suit for damages for conversion of the goods.
Finding of the Court:
The court held that the contract was an agreement to sell future goods and not a sale, and therefore the property in the goods had not passed to the plaintiff. The court also held that the Railway administration was entitled to cancel the contract under Clause 2(d) of the agreement, as it had the right to use the coal-ash for its own requirements or to issue it to Government and Semi-Government works. The court further held that the plaintiff's claim for damages for conversion was misconceived, as he had no right to the coal-ash until it was picked or unpicked and stacked by the Railway administration.
Issues: 1. Whether the contract was a sale or an agreement to sell. 2. Whether the property in the goods had passed to the plaintiff. 3. Whether the Railway administration was entitled to cancel the contract under Clause 2(d) of the agreement. 4. Whether the plaintiff's claim for damages for conversion was misconceived.
Ratio Decidendi: 1. Under Section 6(3) of the Sale of Goods Act, a contract for the sale of future goods operates as an agreement to sell the goods. 2. The property in future goods passes to the buyer only when they are produced or manufactured, and without any further act of appropriation. 3. A seller has the right to cancel a contract for the sale of future goods if the goods are required for the seller's own requirements or to be issued to Government and Semi-Government works. 4. A claim for damages for conversion can only be made if the plaintiff has a right to the goods.
Final Decision: The appeal was allowed and the judgment and decree of the lower court were set aside. The plaintiff's suit was decreed to the extent of Rs. 2,348 on account of refund of the amount deposited by him towards the price and earnest money, with interest.
( 1 ) THE Union of India, representing the Central Railway, has filed this appeal, against the judgment of the Addl. District Judge, East Nimar, Khandwa at burhenpur, dated 29th September 1970, decreeing the plaintiff's claim for damages for conversion of goods to the extent of Rs. 16,016.
( 2 ) THE facts briefly stated are these. On 22-5-1968, the plaintiff's tender for purchase of coal-ash accumulated at the Nandgwm. pump-house for a period of one year from the date of the execution of the contract for a sum of Rs. 2,135 by running contract on a lump sum basis was accepted. The estimated quantity of coal-ash was 3,500 c. ft. , and the rate settled was Rs. 61 per brass, i. e. , 100 c. ft. The plaintiff, accordingly, on 22-5-1968 deposited an amount of Rs. 2,135 being the price of coal-ash for a year in full, i. e. , the period of contract, and also Rs. 213 as security deposit. Thereafter, the parties executed a formal contract dated 15-6-1968, Ex. D-1, for sale of coal-ash by running contract. The defendant-Railway administration, however, by its letter dated 20-6-1968, ex. D-2, cancelled the contract.
( 3 ) THE plaintiff's claim is that the unilateral cancellation of the contract by the defendants -WAS not binding on him and their wrongful refusal to sell the goods contracted for amounts to a breach of the contract, which entitles him to recover damages amounting to Rs. 18,615 being the price of 250 brass of coal-ash at the rate of Rs. 51 per brass, after deducting Rs. 10 per brass towards expenses for collection. The plaintiff pleaded that the average deposit of coal-ash at the Nand-gaon. pump-house was one brass i. e. 100 c. ft. per day, and the market value of the same was Rs. 61 per brass and, therefore, the plaintiff was deprived of 365 brass of coal-ash during the contract period. It was further pleaded that under the terms of the contract, the plaintiff was entitled to remove and collect all the coal-ash that accumulated during the period from 156-1968 to 14-6-1969, i. e. , for A period of one year from the date of execution of the contract.
( 4 ) THAT claim of his was repudiated by the defendants. They specifically denied that there was any liability on their part to satisfy the plaintiffs claim as laid and pleaded instead that they were entitled under Clause 2 (d) of the agreement to cancel the contract, as the coal-ash was required by the defendants for their own use. It was, however, elicited during the trial by a cross-examination of narayan Sarwate, P. W. 1, Central Railway, Manmad (D. W. 1), on the basis of the records of the Railway administration that during the period in question, out of the total outturn of coal-ash at the Nand-gaon pump-house the Railway administration had itself utilised 10,787 c. ft, and the remaining quantity comprising of 15,000 c. ft. , and 15,737 c. ft. of coal-ash had been issued to two contractors on the basis of certificates of the Block Development Officer, at the rate of Rs. 61 per brass.
( 5 ) ON these facts, the learned trial Judge has decreed the plaintiff's claim, holding that under Clause 1 (a) of the agreement, all the coal-ashes at the nand-gaon pump-house that might nave accumulated w. e. f. 15-6-1968 to 146-1969, had been sold to the plaintiff for a lump sum payment of Rs. 2,135. That decision of his proceeds on the hypothesis that Clause 2 (d) of the agreement was not attracted in the instant case. He, therefore, holds that the defendants had no right to sell 30,737 c. ft. of coal-ash to the contractors. Upon that basis, the has held that the plaintiff was entitled to recover Rupees 15,625. 87 p. being the price of 30,737 c. ft of coal-ash, which was given to the contractors, at the rate of Rs. 51 per brass, and Rs. 338. 31 p. towards proportionate refund, being 61% of the price of Rupees 10,787 c. ft. , utilised by the Railway administration, thus in all, Rs. 16,014. 18 p. He has also allowed Rs, 1. 82 p. towards notice expenses. ( 6 ) THE three question
